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FCC Orders Bell Atlantic to Repay Rainbow

Washington-Bell Atlantic Corp. must pay damages totaling $345,600 plus interest from Oct. 4, 1996, to Rainbow Programming Holdings Inc. in a dispute over access to the telco's video-dialtone platform in Dover Township, N.J.

The Federal Communications Commission ruled July 6 that damages and interest were appropriate because Bell Atlantic repeatedly refused to license Rainbow the necessary software to deliver programming to subscribers after promising the company and the FCC that it would.

"In light of these facts, we conclude that Bell Atlantic's refusal to make the ... software available to Rainbow was an unjust and unreasonable practice," the FCC said in a decision by its Enforcement Bureau.

Rainbow is the programming arm of Cablevision Systems Corp., the Bethpage, N.Y.-based MSO that serves about 2.6 million cable subscribers in New York, New Jersey, Connecticut and Massachusetts.

The issues in the case go back five years, to the time when the FCC attempted to allow phone companies to compete with cable operators while phone companies' video services were tightly regulated.

The commission created the VDT scheme to bypass a federal law that barred local phone companies from providing video programming directly to their local phone customers. Congress enacted the ban in 1984, fearing phone companies would leverage their voice monopolies to take control of the cable business.

Viewing cable as a mature business no longer in need of protection, the FCC decided in 1994 to allow phone companies into cable, but limited the telcos' investments in programmers to 5 percent equity or less and compelled them to establish a platform that programmers could access at tariffed rates.

In 1996, Congress immediately lifted the cable-phone company cross-ownership ban, created open-video systems to allow phone companies to provide video without franchises and ordered the FCC to abolish its VDT rules.

Rainbow's dispute with Bell Atlantic resulted from Rainbow's attempt to test whether Bell Atlantic was in fact providing an open platform under the VDT rules. In early 1995, Rainbow paid Bell Atlantic $345,600 to reserve 192 channels on the VDT system it began operating in January 1996.

When Rainbow found it could not provide service without the necessary software promised by Bell Atlantic, it demanded its money back in October 1996. But Bell Atlantic refused, prompting Rainbow to file a complaint with the FCC.

"We are very pleased that the FCC has validated Rainbow's position on this issue by requiring Bell Atlantic to refund, with interest, our channel deposit for their now-defunct video-dialtone system," Rainbow spokeswoman Christine Levesque said.

Bell Atlantic converted the VDT system to an OVS, later deciding to shut it down, Bell Atlantic spokeswoman Susan Butta said.